The Carried Interest (carry) is a performance fee, taken as a percentage (usually 10 to 30, average of 20) from future investment profits that a private equity fund makes. It is paid to General Partners (GPs) of a private equity firm usually after they meet a certain perfomance threshold which is often a certain amount of money they make for investors the Limited Partners (LPs). In venture capital circles, the carry is often called the “2 & 20.” The two (2) is the two percent magement fee, while the tweenty (20) is the carried interest fee (carry). Carried interest is not considered part of an individual’s take-home pay and so is not affected by income tax. It’s taxed at a much lower rate as capital gains. According to a Techcruch report, including carry the average General Partner in a venture capital firm got a compensation of $634,000 in 2017.
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